The USD continued to gain or consolidate against most of the major currencies. Notably, GBP/USD and NZD/USD have been under pressure since the market opened Sunday night (currently down 84 and 54 pips respectively.) The Euro has been trading sideways against the U.S. Dollar as the demand for Euros in terms of GBPs has been propping the Euro side of the equation up. [Remember the concept of arbitrage: if EUR/GBP moves up by relatively the same amount that GBP/USD moves down, then EUR/USD will remain constant (in practical terms this means consolidation.) ΔEUR/GBP+ΔGBP/USD=ΔEUR/USD] There are computerized automated systems all over the world that are in and out of trades in milliseconds and profit from performing arbitrage to keep this equation in balance. Once you understand the concept of arbitrage, it's easier to identify which side of the equation is driving price action.
In fact, you don't even need to look at a EUR/USD chart to see how price action is unfolding! You can tell how price is moving on a chart of EUR/USD simply by watching the EUR/GBP and GBP/USD charts.
So when will EUR/USD move and in what direction? For the last couple of trading days there seems to be both broad strength (broad = key!) in the U.S. Dollar and the Euro across the board. I'll be looking for one of them to start exhibiting weakness against the other major currencies (GBP, AUD, NZD, CAD), and then I'll know whether its the USD or the Euro I want to short against the other.
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